The State of Florida has added to its already-strong motor vehicle franchise protections with two new provisions which went into effect June 26, 2017.
The first new protection relates to manufacturer-required facility upgrades. If a dealer performs an upgrade on his or her dealership facility pursuant to a manufacturer standard or program then the dealer is considered in full compliance with its facility for ten (10) years. In many cases, manufacturers attempt to avoid these statutory “grandfather” periods by simply creating an incentive program which places a dealer at a competitive disadvantage if he or she does not comply with a new facility requirement before the end of the grandfather period. Manufacturers will be unable to employ that tactic in Florida. Instead, the new franchise protection provides that the dealer completing the facility upgrade will continue to be entitled to all the benefits of the prior facility program for the balance of the 10-year period. In addition, the dealer is entitled to any increase in benefits between the prior and new facility program for the balance of the 10-year period.
This new dealership facility provision will serve to protect the dealer’s investment in their franchise and afford him or her the opportunity to obtain at least some return on the facility investment before facing the decision as to whether to upgrade to the manufacturer’s latest facility requirements. Importantly, this new grandfather period protection does not limit the preexisting protection Florida dealers have to decline any manufacturer-mandated facility upgrade which is not reasonable under the dealer’s specific market circumstances.
The second new protection relates to a manufacturer’s sales and service performance criteria. A manufacturer may not utilize any such performance criteria which is unfair, unreasonable or does not include “all relevant and material local and regional criteria, data and facts” associated with the dealership’s specific market. The statute defines relevant data and facts to include a comparison to a similarly situated dealership in another market.
This new restriction on enforcing unreasonable performance standards upon a dealer is derived in part from the favorable court decision in Beck Chevrolet v. General Motors in which the court found that the sales performance criteria being used by GM to attempt to terminate the dealership (Retail Sales Index) was unreasonable as it failed to take into account unique circumstances in Beck’s market which prevented the dealership from increasing its market share to meet the RSI standard. In that case, the primary unique market circumstance was local customers’ strong preference for import vehicles. However, under Florida’s new franchise protection, the relevant local facts could be anything from competing brand preference to economic or demographic realities which disfavor the subject brand or unusually high same-brand competition in the market and beyond. Florida dealers receiving pressure from their manufacturer to increase sales and market share must be cognizant of this new protection and be sure to include a description of relevant facts in a written response to the manufacturer.
Also within the new limitation on performance criteria, if the performance standard is based upon a survey (i.e. customer satisfaction) then the survey must be based on a statistically significant and valid sample. This will be incredibly helpful to dealers in smaller markets where only a handful of customers return their CSI surveys. In those situations, it is well known that customers who are not satisfied are usually the only ones to return a survey thus skewing the survey results against the dealership.